European markets have closed, and in positive mood on renewed hope of progress in the eurozone crisis.

Admittedly trading volumes were light, thanks to the summer holidays and the rival attraction of the Olympics. Even so the FTSE 100 finished 21.49 points higher at 5808.77, a new three month high. The performance would have been even better if not for a last minute 6% plunge by Standard Chartered, as the bank faced possible regulatory problems in the US.

Over in Greece, the government’s three party leaders are holding another round of crunch talks. Our correspondent in Athens Helena Smith writes:

The taboo subject of privatizations is on the table this time with prime minister Antonis Samaras reportedly telling aides that he wants to have made headway on the sale of loss-making state assets, mergers of public organizers and the opening of “closed shop” professions by the time he begins his first tour of EU capitals on 24 August.

At the top of the agenda are the sale of the state lottery, Hellenic savings bank and government-owned real estate. The €11.5bn austerity package to be enforced over the next two years – and set as a condition of further rescue loans from Greece’s troika of creditors at the EU, ECB and IMF - will also be discussed.

In what has become a race against time, the conservative-led government is determined to press ahead with reforms that will shore up the debt-stricken country’s lost credibility – a step that is viewed as vital if it is to begin the even trickier task of renegotiating the €130bn bailout accord it signed up to with lenders earlier this year.

Officials say Samaras wants to have “tangible results” by the time he meets French President Francois Hollande in Paris on August 24 and the German chancellor Angela Merkel in Berlin the following day. The talks will be the leader’s first with EU counterparts since his fragile coalition assumed power six weeks ago (within days of taking over office the politician underwent emergency eye surgery which has prevented him from travelling).

Ahead of the foreign visits, government officials say they hope a meeting with Eurogroup chairman Jean Claude Juncker in Athens on 22 August will mark “the beginning of a turnaround” in the negative attitude of several EU capitals towards Greece. “The prime minister doesn’t want to be making any more promises, he wants to have tangible results, weapons, that will knock the deep suspicion of Greece, once and for all, on the head,” said one insider.

The mass-selling newspaper Ta Nea said that Samaras believed that if the tri-partite government “passes this test successfully then as early as the autumn -- and propelled by a good [quarterly economic] review by the troika – the way may open to changes in basic structures of the mnimonio [loan agreement].”

In a sign that the climate may be changing, mission chiefs representing the troika ended a two-week inspection tour on Sunday saying their visit had been “productive.” After months of being chastised for its lack of fiscal progress – and failure to meet deficit-reducing targets – that’s high praise for Greece. “The troika has found dealing with a coalition government representing the left and right much easier,” said the insider. “And perhaps for the first time they have real faith in Yiannis Stournaras the finance minister delivering on his promises.”

An immigrant is frisked by a police officer during an ID-check operation in central Athens, Greece. Photo: Epa/Alkis Konstantinidis

European Central Bank bought no government bonds last week

The European Central Bank refrained from buying government bonds last week, once again, as it kept its powder dry for whatever emerges following comments from president Mario Draghi on Thursday.

Since starting its Securities Markets Programme in May 2010 it has spent a total of €211.5bn. Draghi - who had tantalised the market earlier with talk of doing whatever was necessary to save the euro - said on Thursday the ECB may buy further bonds, but only once struggling countries had applied to the EU's rescue funds and agreed to tough conditions.

Commenting on the lack of buying last week, Annalisa Piazza at Newedge Strategy said:

At last week's press conference, Draghi clearly said that details of the new "non-standard" measure will be different from SMP. The size and details of the operations would be unveiled (including maturity and country) and the focus will mainly be on short-dated bonds, unlike the SMP.

Draghi suggested that details of the programme will be discussed in the coming weeks, hinting at a possible official announcement at the ECB September meeting. The Spanish government relaxed its tone with the regards of possible EFSF aid last Friday but the EU announced today that no requests have been brought forward yet.

In the meanwhile, we have seen a number of interventions by officials (i.e Coeure, Praet, Visco) over the weekend (and today with comments by the German government) that confirmed that the ECB action is strongly supported by the majority of the members and governments. The urgency of the programme seems to be a key problem as current level of interest rates (in the EMU periphery) don't represent fundamentals.

Mario Draghi, president of the European Central Bank at last Thursday's press conference. Photo: AP/Michael Probst

Wall Street has joined in the mood of optimism, on growing hopes of progress in the eurozone crisis as Spanish and Italian bond yields edge lower.

Of course, trading volumes are thin all round, given it's holiday time. Even so the Dow Jones Industrial Average has made a bright start to trading, up more than 50 points. Sentiment has been helped by news that Knight Capital, the US market maker which suffered a software glitch last week that led to widespread rogue trades, had received a $400m rescue package.

Speaking of glitches, the Spanish stock market is open after a problem delayed trading. It is now making up for lost time, with the Ibex up 2.9%.

Finland growth fears

Finland, the only eurozone country with a AAA Moody's rating with a stable outlook, has warned that its economy may stall next year.

Finance Minister Jutta Urpilainen said 2013 growth may be between zero and 1% next year, down from a previous forecast of 1.2%.

Finland has kept its budget deficit within European Union rules since 1996 and targets a balanced budget by 2015. The government has announced €1.2bnin tax increases and €1.2bn in spending cuts to help reach that target. Urpilainen said that the government plans no new tax increases or spending cuts even as it needs to stay prepared for a potential worsening of the economic turmoil.

My colleague Graeme Wearden went to Helsinki last week to try and discover what Finland's being doing to avoid the crisis gripping most of the continent. You can read his dispatch here.

Finland is the only country in the eurozone with a triple-A rating from credit agencies

Has Danny Alexander told the Chancellor that credit ratings are not the be all and end all? As the Government’s policies have failed on growth, jobs and borrowing George Osborne has spent the last year clinging on to the only thing he had left – the support of the credit rating agencies.

Just ten days ago George Osborne desperately tried to claim that a statement from one credit rating agency meant the world had confidence in his policies, even though Britain is one of just two G20 countries in a double-dip recession. But even the credit rating agencies are beginning to lose faith in the Chancellor with two of the three main agencies having now put Britain on negative outlook.

Danny Alexander's comments suggest Ministers are worried about more bad news from the rating agencies if they continue failing to deliver economic growth. But instead of a change in rhetoric the country needs a change of course and a plan for jobs and growth.

Rachel Reeves: "Danny Alexander's comments suggest Ministers are worried about more bad news from the rating agencies if they continue failing to deliver economic growth. But instead of a change in rhetoric the country needs a change of course and a plan for jobs and growth."

Key event

The tone in the debate is extremely dangerous. We've got to take care that we don't talk Europe to death. We can't allow our actions to be reduced to attempts to raise political profiles domestically - and that goes for Germany too.

The situation in Europe is too serious for that and there's too much at stake.

Mario Monti calls for a vote of confidence on spending cuts

The Italian PM has called for a vote on the nation's spending cuts plan, Reuters reports.

Monti called for the vote in the lower house of parliament to speed up the delivery of a planned €4bn of spending cuts. The cuts, which come on top of €10.5bn of cuts already announced in December, have already been backed by the upper house.

FTSE 100 hits 3-month high

The London bluechip index has breached the 5,800 points barrier and hit a three-month high.

Analysts said the rally was due to growing confidence that the ECB will take action to curb rising Spanish and Italian borrowing costs soon. However, others cautioned that trading volumes are very low because of the Olympics.

With cash-strapped Greece far from turning the corner in its worst crisis in modern times, the revelations have caused ructions with senior bankers describing Theodoros Pantalakis' behaviour as "insensitive and distatesful."

Even if the former chief executive appeared to have acted within the boundaries of legality, the transfer of such a large sum for the express purpose of investing in real estate in London raised "ethical questions" at the very least, they said.

"When you are appointed to the post by the state, there is the issue of leading by example," said one financier. "At a time of such crisis, when Greeks are suffering so much, there is an ethical question that cannot just be brushed under the carpet." With his attitude of "let them eat cake,"

Pantakis has infuriated ordinary Greeks who have seen their purchasing power drop dramatically since Europe's debt crisis erupted in Athens in December 2009 as a result of increased taxes, pay and pension cuts.

Another banker said: "Everyone knew that Atebank was going to be sold, it wasn't a secret. To act like this only months before is insensitive and distasteful."

Greece's Kathimerini newspaper reported this morning that in testimony before a parliamentary committee last week, Bank of Greece governor Giorgos Provopoulos revealed that accusations of the transfer of up to 10 million euro "by a senior ATEbank officia" were being investigated by Greece’s anti-money laundering agency.

However, the governor stopped at naming Pantalakis. The case follows a number of similar incidents involving politicians and their spouses. Earlier this year it was revealed that the husband of a leading Greek MP had moved around 100 million euro out of Greece at a time when the then finance minister Evangelos Venizelos was warning of the dangers of the capital flight and appealing to Greeks to bring their money home.

"It is 8 million euros, mine and my family's. It is legal, reported and taxed and part of the family's wealth, the level of which justifies [the transfer]," Pantalakis told Athens' Realnews.

The account's movements prove that the (money) was transferred in installments and the purpose of the transaction was to acquire an asset abroad.

Pantalakis told the FT from his villa on the island of Paros: “I’m on holiday and I don’t plan to say anything more until I come back to Athens."

Pantalakis stepped down from ATEbank after its healthy assets were taken over by Piraeus Bank, the country's fourth-largest lender, last month in a move that sparked expectations of further consolidation in the struggling sector.

Greece's central bank chief George Provopoulos has defended the government's decision to transfer ATEbank's healthy assets to Piraeus as the best solution on the table to avoid job losses and safeguard stability in the banking sector.

The deal has come under fire from ATEbank's union, which has announced rolling strikes, while leftist opposition party Syriza has called it the "Great Robbery".

Hollande pushed Monti to take bailout cash

There's a lot about in the foreign press today. Italy's Corriere della Sera says French President Francois Hollande is pushing Italian Prime Minister Mario Monti to request aid from Europe’s bailout fund to help ease speculation among investors.

Hollande’s strategy, which also includes pressing Spain toward a request for aid, is designed to help protect France from market speculation, Corriere della Sera said. Monti doesn’t like the idea of requesting aid and may discuss it with Draghi today, the newspaper reported according to Bloomberg (corrects paper from la Repubblica).

Analysts expect bank rally if Draghi plan goes ahead

Analysts at Espirito Santo reckon's banks could put in a strong rally if ECB president Mario Draghi's plan is enacted.

We believe that investors should focus on his new initiative to purchase sovereign bonds in adequate (not limited) size, potentially in an unsterilized manner, and potentially also so that it is not senior to private creditors. This represents a significant change in stance from the ECB President (compared to the limited and sterilised purchases from the SMP before) in assuming a more proactive and lasting role in solving the debt crisis.

However, while we would consider the plans much more effective than the LTROs (and therefore could lead to a more sustainable market rally), we still have longer term concerns that the fundamental problems in the Eurozone will remain unresolved. It is also the case, of course, that Germany and other countries might veto the plans (or important aspects of it) in the first instance.

President of European Central Bank Mario Draghi. His plans to save the eurozone have met opposition from the Bundesbank

Triple A:

George Osborne has made maintaining Britain's coveted triple-A rating a key plank of his Chancellorship, but it seems Danny Alexander, the chief secretary to the Treasury, is less fussed.

The credit rating is not the be-all and end-all. What matters is have we got the right policy mix for the country to get people back into work, to support economic growth, to deal with the huge problems in our public finances and the credit agencies reflect on those things and the ratings they give are a reflection of the credibility of that mix.

"Quatro Reich"

It comes after an Italian newspaper splashed its front page on a photo of Angela Merkel with her arm raised and the headline "Quarto Reich".

Meanwhile, in an op-ed in Germany's Bild Romano Prodi, a former Italian prime minister and president of the EU Commission, urged Germany to show "true leadership" in steering the continent through the crisis, saying the bloc's biggest economy has the duty "to lead Europe toward a better future."

If Germany fails to lead through the crisis, it "would be the political end, for Europe and for Germany," he insisted, urging Berlin to present a "clear action plan to achieve a democratic, federally structured Europe."

Update: It is important to note that il Giornale is owned by Berlusconi

Monti warns of EU break up

The big news this morning is coming from an interview Italy's Mario Monti gave to German magazine Der Spiegel, in which he warned that growing Italian resentment against Germany risks the break up of not just the eurozone but the European Union itself. He said the eurozone tensions "bear the traits of a psychological dissolution of Europe," adding that Europe "must work hard to contain it."Asked about a strengthening in resentment between the allegedly profligate southern European nations and the bloc's thrifty northern members, Monti told Der Spiegel "it is very alarming, and we have to fight against it.""Yes, there is a front line in this area between north and south, there are reciprocal prejudices," according to AP's report of the interview.